Kenya’s climate policy landscape is evolving, with significant legislative advancements shaping the country’s approach to carbon trading and broader climate action. It took seven years for the Climate Change Act to recognise carbon markets, leading to the enactment of the Climate Change (Amendment) Act, 2023. This amendment laid the foundation for the Climate Change (Carbon Markets) Regulations, 2024, which were officially gazetted on May 17, 2024.

However, the Carbon Markets Regulations could not function in isolation. Additional regulatory frameworks were required to operationalise the system, leading to the development of the Draft Climate Change (Carbon Trading) Regulations, 2025, and the Draft Climate Change (Non-Market Approaches) Regulations, 2025. These regulations aim to create a structured ecosystem for both market-based mechanisms, such as carbon trading, and non-market approaches (NMAs), which emphasise collaborative climate action without financial transactions.

Highlights of the draft Climate Change (Carbon Trading) Regulations, 2025

The proposed regulations seek to provide a structured framework for carbon trading in both voluntary and compliance markets. They align with Kenya’s National Climate Change Action Plan and Nationally Determined Contributions (NDCs), which outline the country’s strategies for mitigating and adapting to climate change under the Paris Agreement.

One notable provision is that the National Climate Change Council will have the authority to restrict the volume of carbon credits being traded. Restricting the volume of traded carbon credits is a double-edged sword. On the one hand, the move is in line with the core mission of ensuring that emissions are genuinely reduced rather than allowing businesses to emit more simply because they can buy credits. A cap ensures that emission reductions remain the primary goal rather than just trading offsets. 

On the other hand, stakeholders engaged in carbon markets may face increasing limitations in trading opportunities, as the volume of carbon credits will be subject to periodic reviews. Since credits are issued based on emission reductions beyond Kenya’s NDC targets, continued progress in cutting emissions will reduce the availability of tradable credits. As the country moves closer to meeting its climate goals, the supply of carbon credits is likely to decline, further restricting market activity. 

Another key aspect is that the Ministry of Environment, Climate Change & Forestry Cabinet Secretary (CS) will have the authority to publish a list of mitigation activities excluded from bilateral or multilateral carbon trading agreements. To ensure transparency and prevent potential misuse of this power, a well-defined framework should outline the criteria and process for determining which activities are restricted.

Highlights of the draft Climate Change (Non-Market Approaches) Regulations, 2025

NMAs focus on climate actions that do not rely on market mechanisms like carbon trading. Instead, they emphasise cooperation, capacity building, and policy coordination. The draft regulations establish a national web-based platform for the submission of NMA projects, with the National Environment Management Authority (NEMA) responsible for reviewing and monitoring these initiatives. Additionally, annual reporting will be required from both proponents and the CS.

One critical aspect of these regulations is promoting broad participation across different sectors. However, since NMAs do not offer direct financial returns, this raises the question: What incentives exist for private sector involvement?

Encouraging private sector participation in NMAs

To encourage businesses to engage in NMAs, policymakers could consider integrating them into broader Environmental, Social, and Governance (ESG) compliance frameworks. Companies that actively participate in NMAs could benefit in several ways, including:

1. Regulatory Advantages – Businesses may receive advantages in licensing, public procurement, or regulatory approvals.
2. Access to Green Finance – Participation in NMAs could improve eligibility for green bonds, climate finance, or donor-funded projects.
3. Enhanced ESG Ratings – Strong involvement in NMAs can boost a company’s ESG rating, making it more attractive to investors and international partners.
4. Brand and Reputation Benefits – Organisations engaged in NMAs can strengthen their sustainability narrative, appealing to environmentally conscious consumers.

While NMAs do not generate immediate commercial returns like carbon trading, they provide long-term strategic benefits for businesses that align with Kenya’s climate agenda.

Final thoughts

Kenya’s climate change regulatory framework is evolving to include both market-based and non-market approaches. The introduction of the Carbon Trading and Non-Market Approaches Regulations, 2025, reflects a more comprehensive approach to climate governance. However, ensuring transparency, stakeholder engagement, and private sector incentives will be key to the successful implementation of these policies. Policymakers must strike a balance between regulatory controls and creating an enabling environment for businesses to contribute meaningfully to Kenya’s climate goals.